Winona City Manager Judy Bodway met with Kevin Kuhlman, Regional Director at McKinstry Essention, Inc. on Tuesday, January 15, to discuss a perennially problematic and disappointing methane combustion project for which the city hired McKinstry in 2008.
Photo by Chris Rogers
Representatives from the Winona Waste Water Treatment Plant, McKinstry, and subcontractors met at the plant.
The project saw $22,000 dollars of unexpected maintenance costs in its first year. A $120,000 new boiler was installed last summer because the old boiler could not burn methane consistently. Unfortunately, the new boiler does not, either.
Whether or not the project reaches expected savings, the city is now several years behind the payback schedule for the project. In the meantime, the city must still make bond payments. For the time being, less money than expected will be coming from energy savings at the sewer plant to help make the bond payments.
Methane project overview
The idea of the project was to burn methane captured at the city's waste water treatment plant to produce electricity and heat. However, since the system was first put in place in 2009, it has never functioned correctly. The project has run up tens of thousands of dollars in unexpected costs and unrealized energy savings.
The methane project was part of a larger, $1.6 million energy savings contract between the city and McKinstry. The city did not "bid out" this contract to the lowest bidding contractor, but rather hired McKinstry based on a Minnesota statute that allows cities to enter guaranteed energy savings contracts without the normal bidding process, provided that the contract contains a written guarantee that energy savings will exceed the cost of the project.
The contract between McKinstry and the city does contain a guarantee stating, "McKinstry Essention will guarantee the performance of the installed initiatives to reduce energy consumption." In 2008, when the city first began talks with McKinstry, a spokesperson from McKinstry said, "If those [savings] aren't happening, we write a check."
The project has never reached its target energy savings, but no such check has been written.
And, apparently, the city is not asking for one.
When asked by the Winona Post if she had asked McKinstry to pay for the shortfall in savings, Bodway said, "Well, we don't know if we are going to have a shortfall yet."
Public Works Director Keith Nelson told the City Council last December that for years, the methane project fell over $40,000 short of its expected $130,849 worth in annual energy savings from 2009 to 2011. Bodway attended that meeting.
The numbers for 2012 are not available, Nelson told the Winona Post in an interview. However, one half of the methane combustion system is not burning methane but, in fact, natural gas purchased by the city, so presumably, savings for 2012 were also shy of the expected numbers.
When asked if the city asked for a reimbursement for the past shortfalls reported by Nelson, Bodway said, "No, we have not talked about that because we don't have a completed project as of yet." She added, "We're going to see what happens here and how this goes."
The project will be "completed," Bodway said, when it runs properly.
"What we really want is this project up and operating for the long term," she said. "That's our goal right now and we want to make sure that that gets done."
Further confounding matters for the city, the McKinstry contract's guarantee is contingent on the city paying McKinstry to provide an "on-going performance assurance" each year. Without this service, the contract states that the guarantee will be void. When asked if the city had paid for the "on-going performance assurance," Bodway said, "I can't tell you; I don't know."
However, Bodway said last week that the guarantee from McKinstry is still in place, although she said it was not discussed at their meeting.
Can we fix it?
Bodway said that the goal for both the city and McKinstry is to have the methane project function as it should and realize its projected savings. Essentially the plan is to fix it and hope to get the promised savings, albeit a little late.
Representatives from McKinstry and their subcontractors, Unison Solutions and UHL, along with Waste Water Treatment Plant Supervisor Paul Drazkowski met on Friday, February 1, to look at the "nuts and bolts" of the system at the sewer plant.
Despite past failures, the city and McKinstry are hopeful they can fix the methane project, according to Bodway.
Fixing the methane system will not change the $40,000 per year impact shortfalls had on the city budget from 2009 to 2011.